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Midnight Epiphany -

(Thursday - Preopen) So there I was, laying in bed at about 1 AM today and suddenly I get the major epiphany: Why we have had no additional terrorist events since the anthrax attack and the American 587 crash (shoe bomber 1)??? 

Here's what hit me - and it fits into my Oil War Two framework posted a few months back on the subscriber side of this site.  See if it makes sense to you:

• You'll remember the Russians have been saying for a long time that there's a battle on for control of the West between two major forces.  One of these is the faction that wants to build a U.S. centric (manufacturing countries) world, while the other side is a faction that wants global (more global resource-sensitive) government to dominate the U.S. - not the other way around.
• Suppose for a moment that the 9/11 attack was promoted by one faction (manufacturing)  and the anthrax attack by the other (the resource holders)...
• What that would set up would be a new "balance of terror" on a global level between these two "factions" as the Russians call them?
• If we speculate that somehow  "dominant U.S. manufacturing forces" had a hand in the events leading to 9/11 (and remember, our own CIA trained Osama) and the "dominant resource owning globalists" had a hand in anthrax, you could then speculate about the "hidden messages" contained in both events:
• The "hidden message" of the 9/11 event was "We - the dominant U.S. manufacturing forces - now have a reason to go after anything we want in the Middle East - which means oil"
• The "hidden message" of the anthrax attacks that followed could be one of "Yes, you can try to take Middle East resources for yourself, but we can take out your entire congress and all your media if you do..."

I expect that both factions have "cooled their jets" for a while, as both work on their next moves.  Clearly, the U.S.-centrists have been working to promote preparation for a globalist-led bio-terror attack.  We're seeing talk about mass immunizations in the papers every day.  So what are the globalists up to in return?  Perhaps the little flare up in the Ivory Coast this week is typical.  The latest "hidden messages" might be:

• From the U.S.-centrist faction: "See - we're ready for any bio-attack you might be able to launch."
• From the globalists: "We can dilute your forces all over the world so you'll be fighting everywhere."

Now that we have this schema in mind, a tremendous amount of the daily news then fits into a pattern.  But among the pattern we can see a number of "standoffs" that have developed.  Three or four come to mind:

• The 9/11 vs. anthrax standoff is still intact.  If we grab for oil, look for bio-attacks.  Both sides are pondering this one..
• The economic situation in South America has been fought to a standoff to where either side will suffer unacceptable losses if the situation spirals out of control: globalists will lose credibility of their beloved "global economy" and the U.S.-centrists will lose perhaps half the valuation of the stock and bond markets and both sides will have to chill out while the world works through a second depression.
• India and Pakistan have stalemated, at least for the balance of the questionable weather period.  Pakistan with Chinese support is in the globalist camp, while India is backed by the U.S. (or at least Western)  centrists as part of the enveloping horn (surround and contain) China strategy.
• As the U.S. gears up for Gulf War 2, the globalists can be expected the fan all kinds of other conflicts in places like th4 Ivory Coast and you know that relations with Mexico have already deteriorated since Vincente Fox dissed Bush, by not coming to see the emperor on command, right?

We can draw up a little table and see who is dropping into what slots when you view the world in this odd way:

Russia is a special case.  On the one hand, Bush is cozying up to them.  On the other, the U.K. Independent says this morning that "Russia fears US oil companies will take over world's second-biggest reserves". Article at http://news.independent.co.uk/world/middle_east/story.jsp?story=336691 .  Clearly, Russia is in the middle in a sense. Tied to the U.S. Manufacturers by finance that keeps the country afloat, but knowing that the truth lies somewhere between the manufacturing interests and the globalist hording of resources.

So I have concluded, at least insofar as I have this "model of the world" in my head that tells me what to expect next, that what the Russians are calling the "two factions" are really three factions.  Not that it is U.S. versus the bad globalists, exactly.  It's more like a planetary resource war is shaping up where manufacturing economies of the West seem locked in a death-dance with resource economies.

If this view is correct, then when we see new trouble spots erupt, we should be able to neatly categorize the antagonists into one of these neat and easy to describe boxes.

Doing this, we can take something like the just-concluded German elections and say "Ah ha!  Prior to the election of the Red-Green coalition, Germany was firmly in the U.S. centrist manufacturing states column.  Since then, they have moved into the undecided camp because of their involvement with the greens. 

Just what does an event like the German elections imply?  That Germany may end up being a pawn on the globalist/resource states column, and will become a manufacturing subsidiary of the Gulf and other resource states.

This is a huge planetary war that is being fought in slow motion - so slow that I almost missed the framework.  But now that I've had this flash, it lends a whole extra dimension to the notion that we're in Oil War Two.  It's much bigger than that.

It's the global Manufacturer's Resource War.  Don't expect that to pop up as a headline on CNN.

The implications for the U.S. financial markets are incredible.  But, it also explains all the market action of late, and the direction we're heading.  Literally, this could kill our markets forever, depending on how the war goes and who wins it.  Since the framework of the war has started to trickle into people's awareness, the markets have already shed trillions in value. 

We can't go up because we can share all of our rich way of life.  Yet its that very lack of sharing that has caused the present polarization.  We have ignored a fundamental piece of Cuban (pre-Castro) social advice: "Don't count your money in front of the poor."   Well, thanks to global television, we are rubbing it in the whole world's face every day!

About a month ago, we mentioned to subscribers of Inside Report that the web bots (more on these else one this site) have recently been projecting a bigger tipping point than the one that preceded the 9/11 event.  Something an order or magnitude or more greater. 

This could be it.  A dawning consciousness that the world is really running out of resources (food, oil, air) and that all we need now is some global event - something akin to the shooting of Archduke Ferdinand that set of WWI  - to bring on the mother of all wars envisioned by sages over time as Armageddon -  The Manufacturer's Resource War.

Now playing in slow motion, all over a planet near you.

More right than ever:  Once again, I'll quote from the September 8th edition of "Inside Report" - the one where we predicted that Osama and Saddam would be found in cahoots:

Suppose, for a moment, that Osama has been making sales calls on Iraq and their "president" Saddam Hussein.

Since we wrote that, seems like everyone is finding the same evidence.  Known for close sources in Israeli intelligence, www.debka.com ran an expose' on the topic on Wednesday.  This morning

Rinse Cycle? I note (thanks to the efforts of News Hounds Tim B. again) that Warren Buffett is predicting the markets will get worse before better.  Said words to the effect that we're in the rinse cycle now - and you never know how dirty your laundry is - until you see the rinse water. 

The rest at http://www.timesonline.co.uk/article/0,,5-427302,00.html .

Before the Crash: Short Squeeze Day!

(Wednesday Pre-open)  Well, when it became obvious yesterday that everyone was selling stocks and buying puts, we exited our put positions, backing about 15% on the trade after commish - not a great trade for 2- weeks, but what the hell, right?  Still hanging with the gold stocks, but don't panic if gold touches 320 before heading back up. 

So what is ahead?  No question about it, the market is near-term oversold and that sets up today (and maybe tomorrow) as screaming rallies, better known as short squeeze days.  The running of the shorts.

We're perfectly happy to let the market rally, because when the rally peters out, we will have a wonderful opportunity to re-short prior to the guts of the crash event.  Meantime, News Hound Tim B. sends along the latest from this mysterious Capt. Hook fellow who's one of many writing about the volatility index heading skyward:

               Well, here we are on Fed day, and the markets
               are weak right into the decision time, just
               like I had prognosticated last week. The only
               difference about what I see this week is that
               the equity markets may not rally just yet.

               The reason I think this is because the VIX
               has consolidated above the breakout for 3
               trading days now. That usually means the move
               is going to stick. There is always the
               possibility that the VIX can pull back to
               40ish level, which would be a test of the
               downward sloping channel, but there is a
               greater likelihood of the VIX breaking above 50
               here, as it may very well start forming a
               slanted cup & handle, before it takes off to
               100ish, some time in October.

Hmmm...October?  MAYBE we will last that long.  Meantime, the Aggregate Index (below) says the rally should be a short-lived affair with more downside to come in the near future. 

Trading Tip?

Meantime, I've been watching the IXIC as a leading indicator.  Noticed that when the IXIC is above the DJIA on a % basis, the market moves in that direction.  When the IXIC is below the Dow (losing more percentage wise) the markets move in that direction.  Interesting little quirk - but I'll be watching it for sure!

Followers:

One intrepid reader sent me a piece this week about how CNBC had started to broach the question of Replaying 1929 - which has been the message of this site for five years.  If CNBC was a leader, they would have been way more forthright about the obvious top and slop since.  Maybe if the reporters had been a little more skeptical, and had not been cheerleading billions in hard-earned savings into the wallets of shyster-broker paper-peddlers, we would not see sites cropping up today like wwww.betrayedinvestor.com. 

Perhaps these not-exactly-visionary reporters have friends in the Valley, too, as Dr. W. Z., MD, sends along an article from the 9/25 Mercury News:  The Merc's headline "Coincidence?  Market starting to resemble the '30s":

Yup.  No revelations there.  But then they turn around and quote the other side...

Ken Fisher, chairman of Fisher Investments in Woodside, says the analogy with the 1930s is ``delusional.''

While the Merc has done its usual fine job of finding someone to take the opposite point, we have to ask if it's only a coincidence that the fellow they find to quote has the last name Fisher?  Perhaps the writer momentarily forgot about the Fisher who was pimping stocks at exactly the wrong time at the beginning last depression:

"Stock prices have reached what looks like a permanent high plateau... I expect to see the stock market a good deal higher than it is today within a few months"

Irving Fisher, Professor of Economics, Yale University, Oct 15, 1929

Speaking of brokers, F*ckedcompany.com reports this little gem this morning:

Rocktober
Rumor has it Fidelity is gonna layoff up to 3,000 people this October 1. Word is all the conference rooms are already booked by HR. Stay tuned...

The risk of hiring good people is that they are able to think independently and can add 2 + 2.  Can't we find someone named Fisher to tell us those conference rooms booked for new-hire orientations?

One last item:  Tell a friend or two about this site:  We're now serving 20,000 pages a week - the more the merrier.

Fed Follow:  No, the Fed didn't raise rates, but the reasons we posted in advance kept them from lowering rates. The outcome will be the same, but the Fed will be able to duck the blame...And we should have a nice rally once the bombs start dropping.  Sooner is better for the market.  We'll be going long at the first major sorties.

But between now and then, some downside action is ahead after this running of the shorts today.

The Synchronized Diving Event

(Tuesday Preopening) Will the Fed be forced to up rates?  They may - and if the surprise comes, it would be a market-killer here.  After all, it isn't too often that we see this synchronized diving phenomena in the world of investing, but today - there are five obvious pressures on the Fed to raise rates.  Let me explain:

• Look at the European markets this morning, in the wake of Germany's elections this weekend.  The sort of left leaning Social Democrats in an alliance with environmentalists won - which was bad news for the center-right party.  What we have is a country of damn fine craftsmen with an unemployment level that is north of 9.9 percent.  This mean the Bundesbank will not be inclined to lower rates.  If anything they will need to raise rates and gather in more investment in order to fund the social system and public works projects they will need to jump their economy back to life.
• The U.S. housing market is in a very precarious bubble-ending state right now.  People who have been buying houses are slowing down the refinancing binge, and there are more than a few couples like Elaine & I who can write a check for a major piece of a house, but are not doing so.  Why?  With no inflation, where's the incentive to buy?  We can make more shorting markets than we can in real estate.  But with a "healthy" dose of inflation, more spending money - through a continuation of refinancing - will continue although at higher rates,  We could work out the math for you, but you have the picture: If your home went up $50K in value, would you be tempted to pay another $150 a month to get $50k more to spend? Equity in a home is the biggest chunk of wealth in the U.S. and it's sacred - to be preserved at any price.
• The price of gold and U.S. consumer prices are both showing signs of guess what?  Inflation!  Watch gold which appears ready to break through $325 in the next week or so.
• Comes this morning a report in the prestigious Financial Times that China is now securing more international investing money (e.g. hot money) than is the U.S. http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1031119542114&p=1012571727088 
• Then there's the matter of funding the developing (imminent) Gulf War II.  The only way to pay for the war will be to print money and that, come on class, all together now, spells what?  INFLATION.

As a long-time reader, you may be aware of how we described the so-called Asia Contagion of a few years back.  That whole sorry episode was a series of competitive currency devaluations, moderated only somewhat by the G-8 meetings.  You'll remember how we took pains to explain that as a country devalues its currency, its good become relatively cheaper than competing countries in the U.S. mega-market.  It was not unlike the tariff wars of the 1920's and 1930's depression, except this time the battle was being fought "up stream" before goods were made.

A day ahead of the Fed meeting, we can all see deflationary pressure, in soft real estate prices, rising unemployment, and a consumer-driven economy that is being held together by massive federal job creation through proxies such as the "war on terrorism".  What not everyone can see is the mounting pressure on the other side of the equation - the pressure to raise rates.

While there's a 75% chance the pundits will be right - and the Fed will stand pat - there's this gnawing notion in the back of my mind that keeps whispering "What if they raise rates?" 

The equally quiet answer?  Be short and own gold.

Although the leading indicators due out before the bell are expected to show a 0.1% dip for August - and anything higher would be welcomes by the street - it too would build the rising inflation scenario, which in turn, would signal higher rates ahead.

Just as the Asia Contagion was competitive devaluations, what we see now is a new kind of international competition for investment capital shaping up.  When capital is in short supply, the bidding up occurs through the mechanism of competing higher interest rates. It would screw the equities markets, but failure to inject some inflation into the system right now risks the housing market.  That's what firming gold prices are telling us.

Unfortunately right?

(Monday preopening) A couple of weeks back, I speculated to Inside Report subscribers about the possibility that Saddam Hussein might form an alliance with the radical elements of Wahhabi Islam - and al Qaida - with the likely outcome that it would set up either Hussein or bin Laden to play the role of Nostradamus' "great destroyer".  Well, here we are a few weeks later and we read in the Washington Post how guess which Middle East leaders has recently "got religion"?

"All that changed in the mid-1990s as sanctions began to take their toll on the Iraqi population. With life becoming more difficult, more people began turning to religion. Mosque attendance boomed, as did praying five times a day. In Baghdad, where women once wore the latest Parisian fashions, head scarves and even full-length veils became de rigueur.

Such trends have been viewed with alarm by political leaders in other Arab nations. But in Iraq, Hussein has sought to exploit it. He has become perhaps the country's single biggest proponent of religion."
Ref URL: http://www.washingtonpost.com/wp-dyn/articles/A49600-2002Sep21.html

The only thing missing from the Post's report: the fact that militant Wahhabiism is sort of like a secret order within Islam.  They sidestepped that - perhaps because they don't subscribe to Inside Report.  But, if my speculations turn out to be correct, and the alliance is real, then the outcome is really horrible.

A Few Monday's Off?

(Sunday evening) Elaine's step-sister told her, about this time last weekend, that she had awakened from what was a very bad dream.  She had this vision in the dream that she and her husband had lost a huge amount of their net worth in a terrible Monday market slide.  She had this vision clear as anything.

Although this Monday can reasonably be expected to shape up like something brown you might find in your yard, the real slider could be a few more Mondays away.  Depends on the Middle East and the forces of globalism and the forces of U.S. dominance.  The "two factions" the Russians have been writing about.

Because you enjoy this site - and might subscribe to our Inside Report someday for the modest $50 annual charge, here's a condensed version of the subscriber side for this week...it's called Headlines from Hell:

Derivatives Market Beginning Meltdown,

Volatility Index: Decline 2/3'rd of '87 Due

Mutual Funds Running out of Cash,

U.S. Plunge Protection Team Out of Bullets,

Washington, the Canary State, in Heap of Crap

Think Tank Web Bots Predict War,

Strange Objects in Space Reported

Aggregate Index Charts Establish Downside Breakout

Now the one sentence summaries:

• On Friday, certain derivatives functions in Europe seized up based on technical difficulties that we know are not hardware - the problem is software that never envisioned the kind of market distortions we're presently witnessing..
• There are several credible forecasts of the Volatility Index - VIX - heading to north of 100, which if it happens, would mean a crash 2/3'rd of 87's decline on a percentage basis is ahead...implying a down around 5,400.
• You knew mutual funds were running short of cash due to take-outs and are trying not to sell into a declining market because that will only make things worse, right?
• You also knew that the PPT's efforts are having exponentially declining results, right?  And that last week all they could prop up was derivatives kingpin JPM...
• You know more Boeing cuts are coming and the state budget in Washington might be in a $3 billion shortfall, not the $2 billion guessed earlier,  and that unemployment will sail past 7.1% in the next reporting period with housing prices and sales falling...
• The Think Tank - as subscribers learned a couple of weeks ago, says that we're in a decline that engulfs (is bigger than) the tipping point identified pre-9/11.
• And you know 11 new moons of Jupiter - each 5 km across have been discovered, right?

And, amidst all the confabulations, not to mention the Israeli's are giving emergency room workers inoculations fearing Iraqi bio-attacks... I shot a 95 today in golf (Elaine carded a 103)..an improvement for both of us over two weeks ago at the Tequila Open...which was occasioned by a major rain storm between the front and back nine.  The back nine was more like polo....

The BIG mystery of the weekend?  I tee'd off on the first hole about 11:30 this morning (it's a good 7 iron shot) and my first effort landed on the back of a white swan that was swimming in the water hazard.  The swan was seriously pissed...and I was to busy laughing to walk back up to the clubhouse to ask what the club rule on hitting swans was if the ball bounced back into play.  (The previous week, I hit a skipper on the 6th that had so much spin on it that it bounced off the water and back into play - I referred to that one as my Jesus shot...but this Swan Lake deal, well, darned if I know the rules).  So I took a Mulligan and hope the animal rights people rights people don't get wind of my screw up. Gosh almighty - I can see it now: Remove all wild life from the nation's golf courses to protect them from people like me & Gerald Ford.

Say, you don't notice anything a little discontinuous about the world lately, do you? 

Hint:  Check your clocks in your house against atomic time - you'll find their rate of drift has increased! 

Those are only some of the  many small indicators that are leading top forecasters to buckle up and get ready.  Arch Crawford - premier guru among astrological money mavens & the only one most services take seriously -- says it's about to hit the fan this Monday and beyond.

OK, so you want the web bot output?  Well, fine, but don't say I didn't warn you:

The world will next be moved by armies marching. Great
misfortune lies ahead. One will move first and suffer. One calls on
heaven for favoritism while laboring under self delusion, and all
suffer for it. One calls for grasping at something not needed,
restraint (sitting as a rock) furthers, but those who grasp bring
misfortune. One complains incessantly and constantly, while events
of the past sit heavy, deliberately undigested. One denies hearing
the complaints rising [from the crowd]. One provides the illusion of
serving the higher power, and creates remorse. Hesitation  (on the
part of the people) brings remorse. One is a shell expressing empty
enthusiasm as false accolades come down [from cohorts], risking
much.

An eminent person [of no allegiance and from the North] adjusts to
the prevailing mood and leads (some of) the people (successfully)
through travails and trials.

One feels the pressure and fears its release. The pressure prevents
one from breathing freely, as it prevents one from consuming. One
calls on heaven [while in self delusion and denial] and a lack of
sense prevails.

Misfortune follows.

In one day, the world changes. In 33 days of anguish it is
recognized.

Oh yeah, one more thing: 

The gates of hell are opening as the following Aggregate Index chart shows. 

Bet me a beer we don't have $800/ounce gold by Christmas...

Remember:

A conservative is a liberal who's been mugged;

A liberal is a conservative who's been arrested.

and write when you get rich...

George Ure

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